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Vanguard is closing in on BlackRock, the industry leader in US exchange-traded funds, a $6.6tn competitive battleground for two of the world’s biggest asset managers.
US ETF assets under Vanguard’s management totaled $1.84tn at the end of August, compared to $2.21tn run by BlackRock’s iShares ETF unit, according to newly released data. Vanguard led the pack in attracting money into US ETFs in 2021 and is ahead again this year, receiving more than four times that of BlackRock in August.
BlackRock has been at the top of the ETF industry since its purchase of iShares from Barclays in 2009, but its rival is rapidly catching up. While BlackRock’s US ETFs still hold 20 percent more assets than Vanguard’s, they were up 50 percent in 2019.
Both groups have outperformed other investment houses as they struggle for dominance. BlackRock and Vanguard control more than 60 percent of the US ETF market, which has grown nearly five-fold to 6.6 tonnes from 1.35 tonnes a decade ago.
The largest ETF by assets is State Street’s SPDR S&P 500 Index Tracker, but BlackRock and Vanguard offer 15 of the next 16. They also run the two largest bond ETFs, which positions them to take advantage of what analysts expect. loan product.
Industry experts predict a protracted competition for dominance as both groups seek new investors in turbulent markets. Other asset managers including Invesco, JPMorgan Chase, Fidelity and Charles Schwab are also trying to tap investor interest in ETFs.
“The race in the US ETF market will not end even if the leadership baton moves from BlackRock to Vanguard. Both managers are winning a disproportionately large share of one [ETF] pie that continues to grow,” said Todd Rosenbluth, head of research at Waitafi.
Vanguard and BlackRock are pursuing different strategies and clients. While Vanguard focuses on a relatively small suite of low-cost products aimed at retail investors and their financial advisors, BlackRock’s iShares business also offers a broader set of funds and court institutions.
“We are playing a different game. We want to lead, but it’s also about expanding ETF use to all types of clients. This is more important,” said Armando Senra, who heads BlackRock’s Americas ETF business. He said institutional clients historically used iShares heavily in the fourth quarter as part of their tax strategies, and then predicted an increase in inflows.
BlackRock has 399 US ETFs and 1,309 globally. “We are all about expanding choice and reach. . . . Other competitors are very focused on one customer segment or product segment,” Senra said. “ETFs are one of the engines of growth at BlackRock, but They are not the only engines of our growth.”
Dan Reyes, head of the department that oversees ETF development, said Vanguard offers 82 ETFs and hasn’t started a new one in two years.
“We are constantly looking to expand the offering, but we will be very prudent,” he said. “We stay away from thematic or narrowly truncated versions of the universe.”
Globally, BlackRock also retains substantial gains. It had $2.96tn in ETF assets worldwide, compared to 2.04tn for Vanguard at the end of July, the most recent comparable figures.
Both groups have continued to absorb net inflows, even as total assets under management have fallen since the collapse in equity and debt markets since Russia’s invasion of Ukraine. According to ETFGI, a consultancy, total US ETF assets hit a record high of $7.2tn last year before falling back to $6.6tn at the end of July.
“It has been really encouraging and enjoyable to see the ETF line-up resonate in full swing with investors,” Reyes said.
Ben Phillips, head of asset management advisory services at Broadridge, a fintech company, predicts that shrinking fees for ETFs will prompt Vanguard and BlackRock to redouble their search for other income.
Vanguard recently strengthened its mentorship offering, and BlackRock founder Larry Fink has cited alternative investments such as real estate and private equity as well as its technology division as additional drivers of growth.
“Passive ETF providers tend to consolidate market share, so they sometimes get bigger pieces of the pie with lower fees,” Phillips said.
